PART ONE Introduction to E-commerce

Introduction to E-commerce 1Norton University

PART ONE

Introduction to E-commerce

Chapter 1: The evolution of E-commerce

Chapter 2: E-commerce business models and concepts


Chapter 2: E-commerce business models and concepts


Learning Objectives

- Identify the key components of E-commerce business models.

- Describe the major B2C business models.- Describe the major B2B business models.- Recognize business models in other

emerging areas of E-commerce.- Understand key business concepts and

strategies applicable to E-commerce.


E-COMMERCE BUSINESS MODELS

What is business model?A set of planned activities designed to result in a profit in a marketplace.

What is business plan?A document that describes a firm’s business model.

What is E-commerce business model?A business model that aims to use and leverage the unique qualities of the internet and the World Wide Web.


EIGHT KEY ELEMENT OF A BUSINESS

MODEL1- Value Proposition: How a company’s product or service fulfills the needs of customers. Typical E-commerce value propositions include personalization, customization, convenience, and reduction of product search and price delivery costs.2- Revenue Model: How the company plans to make money from its operations. Major E-commerce revenue models include the advertising model, subscription model, transaction fee model, sales model, and affiliate model.



MODEL (Cont.)3- Market Opportunity: The revenue potential within a company’s intended market-space.

4- Competitive Environment: The direct and indirect competitors doing business in the same market-space, including how many there are and how profitable they are.



MODEL (Cont.)5- Competitive Advantage: The factors that differentiate the business from its competition, enabling it to provide a superior product at a lower cost.

6- Market Strategy: The plan a company develops that outlines how it will enter a market and attract customers.



MODEL (Cont.)7- Organizational Development: The process of defining all the functions within a business and the skills necessary to perform each job, as well as the process of recruiting and hiring strong employees.

8- Management Team: The group of individuals retained to guide the company’s growth and expansion.


FIVE PRIMARY REVENUE MODELSREVENUE

MODELEXAMPLES REVENUE

SOURCE1- Advertising Yahoo Fees from advertiser in exchange for advertisements.

2- Subscription WSJ.com Consumerreport.org

Fees from subscribers in exchange for access to content or services.3- Transaction

FeeeBay E-trade

Fees (commissions) for enabling or executing a transaction.4- Sales Amazon

LLBean Gap JCPenny.com

Sales of good, information, or services.

5- Affiliate MyPoint Fees for business referrals


MAJOR BUSINESS-TO-CONSUMER (B2C) BUSINESS MODELS

Portal: Offers powerful search tools plus an integrated package of content and services; typically utilizes a combined subscription /advertising revenue/transaction fee model; maybe general or specialized.

E-tailer: Online version of traditional retailer; includes virtual merchants (online retail store only), bricks-and-clicks E-tailers (online distribution channel for a company that also has physical store), catalog merchants (online version of direct mail catalog), and manufacturers selling directly over the Web.


MAJOR BUSINESS-TO-CONSUMER (B2C) BUSINESS MODELS (Cont.)

Content Provider: Information and entertainment companies that provide digital content over the Web; typically utilizes and advertising, subscription, or affiliate referral fee revenue model.Transaction Broker: Processes online sales transactions; typically utilizes a transaction fee revenue model.


MAJOR BUSINESS-TO-CONSUMER (B2C) BUSINESS MODELS (Cont.)

Market Creator: Uses internet technology to create markets that bring buyers and sellers together; typically utilizes a transaction fee revenue model.

Service Provider: Offers services online.

Community Provider: Provides an online community of like-minded individuals for networking and information sharing; revenue is generated by advertising, referral fees, and subscription.


MAJOR BUSINESS-TO-BUSINESS (B2B) BUSINESS MODELS

E-distributor: A company that supplies products and services directly to individual business.

E-procurement: Single firms create digital markets for thousands of sellers and buyers.

Exchange: Independently owned digital marketplace for direct inputs, usually for a vertical industry group.

Industry Consortium: Industry-owned vertical digital market.Private Industrial Network: Industry-owned private industrial network that coordinates supply chains with a limited set of partners.


MAJOR BUSINESS-TO-BUSINESS (B2B) BUSINESS MODELS (Cont.)

BUSINESS MODEL

EXAMPLES DESCRIPTION REVENUE MODEL1- Net Marketplace

2- Private Industrial Network

E-distributor

E-procurement

Exchange

Industry Consortium

Single firm

Industry-Wide

Grainger.com, Partstore.com

Ariba, PerfectcommerceFarms.com, FoodtraderElemica, Exostar, Quadream

Wal-Mart Proctor & Gamble

1 SYNC Agentrics

Single-firm online version of retail and wholesale store; supply maintenance, repair, operation goods; indirect inputs.Single-firm creating digital markets where sellers and buyers transact for indirect inputs.

Independently-owned vertical digital marketplace for direct inputs.Industry-owned vertical digital market open to select suppliers.

Company-owned network to coordinate supply chains with a limited set of partners.

Industry-owned network to set standards, coordinate supply and logistics for the industry.

Sales of goods

Fees for market-making services; supply chain management, and fulfillment service.Fees and commissions on transactions.Fees and commissions on transactions.

Cost absorbed by network owner and recovered through production and distribution efficiencies.Contributions from industry member firms and recovered through production and distribution efficiencies; fees for transactions and services.


BUSINESS MODELS IN EMERGING E-COMMERCE AREAS

When we think about a business, we typically think of a business firm that produces a products or good, and then sells it to a customer. But the Web has forced us to recognize new forms of business, such as consumer-to-consumer E-commerce, peer-to-peer E-commerce, and M-commerce.


BUSINESS MODELS IN EMERGING E-COMMERCE AREAS

C2C business models: Connect consumers with other consumers. Provide a way for consumers to sell to each other, with the help of an online business. The first and best example of this type of business is eBay, utilizing a market creator business model.

P2P business models: Enable consumers to share files and services via the Web without common servers.

M-commerce business models: Take traditional E-commerce models and leverage emerging wireless technologies to permit mobile access to the Web.


BUSINESS MODELS IN EMERGING E-COMMERCE AREAS (Cont.)

E-commerce enablers: focus on providing the infrastructure necessary for E-commerce companies to exist, grow, and prosper.


BUSINESS MODELS IN EMERGING E-COMMERCE AREAS (Cont.)

E-commerce enablersInfrastructure Players

Hardware: Web Servers IBM, HP, Dell, SunSoftware: Operation Systems and Server Software

Microsoft, RedHat Linux, Sun, Apache Software FoundationNetworking: Routers Cisco, JDS Uniphase, Lucent

Security: Encryption Software VeriSign, Check Point, Entrust, RSAE-commerce Software Systems (B2C, B2B) IBM, Microsoft, Ariba, BroadVision, BEA SystemsStreaming and Rich Media Solutions Real Networks, Microsoft, Apple, AudibleCustomer Relationship Management Software Oracle, SAP, E.piphanyPayment Systems VeriSign, PayPal, CybersourcePerformance Enhancement Akamai, KontikiDatabases Oracle, Microsoft, Sybase, IBMHosting Services Interland, IBM, WebIntellects, Quest


HOW THE INTERNET AND THE WEB CHANGE BUSINESS: STRATEGY, STRUCTURE, AND

PROCESSThe Internet and the Web have had a major impact on the business environment in the last decade, and have affected:

- Industry structure- Industry value chains- Firm value chains- Business strategy


What is Industry structure ?

The nature of players in an industry and their relative bargaining power by changing the basis of competition among rivals, the barriers to entry, the threat of new substitute products, the strength of suppliers, and the bargaining power of buyers.


How the internet influences industry structure

Threat of substitute Product or Services

Barriers to entry

Bargaining power of suppliers

Rivalry among existing

competitorsBuyers


What is Industry value chains ?

The set of activities performed in an industry by suppliers, manufacturers, transporters, distributors, and retailers that transforms raw inputs into final products and services by reducing the cost of information and other transaction costs.


E-commerce and Industry value chains

Suppliers Manufacturers

Distributors Retailers Customers

Supply Chain Management

Systems

Inventory Management

Systems

Efficient Customer Response Systems

TRANSPOTERSTransportation Management Systems


What is Firm value chains ?

The set of activities perform within an individual firm to create final products from raw inputs by increasing operational efficiency.


E-commerce and Firm value chains

Inbound Logistics Operation

Outbound Logistics

Sales and Marketing

After Sales Service

Secondary Activities

Primary Activities Administration, Human Resources, Information Systems, Procurement, Finance/Accounting


What is Business strategy ?

The set of plans for achieving superior long-term returns on the capital invested in a firm by offering unique ways to differentiate products, obtain cost advantages, compete globally, or compete in a narrow market or product segment.


INTERNET-ANABLED VALUE WEB

FIRM/INDUSTRY CUSTOMERS

INDIRECT SUPPLIERS

DIRECT SUPPLIERS

STRATEGIC ALLIANCE AND PARTNER FIRMS

Supply Chain Management Systems: Private Industrial Networks, Net Market-Places

Customer Relationship Management (CRM) System

ERP Systems, Legacy Systems


QUESTIONS1- What is a business model? How does it differ from a business plan?2- What are the eight key components of an effective business model?3- What are some of the specific ways that a company can obtain a competitive advantage?4- What are some business models seen in the C2C and P2P E-commerce areas?5- Who are the major players in an industry value chain and how are they impacted by E-commerce technology?6- What are four generic business strategies for achieving a profitable business?

PART ONE Introduction to E-commerce

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Transcript of PART ONE Introduction to E-commerce